The variable cost of Part X is $50 and the full cost of the part is $80. The part is produced in country A and transferred to a plant in country B. Country A has a 30% income tax rate. Country B has a 50% income tax rate and an import duty equal to 10% of the price of the item. Part X can be transferred at full cost or variable cost. Assume that Part X is priced at full cost. The net tax effect is:
A) an increase in tax by $6 per unit
B) a decrease in tax by $15 per unit
C) a decrease in tax by $3 per unit
D) an increase in tax by $9 per unit

Question

Quizplus · Accepted Answer

The Answer of The variable cost of Part X is $50 and the full cost of the part is $80. The part is produced in country A and transferred to a plant in country B. Country A has a 30% income tax rate. Country B has a 50% income tax rate and an import duty equal to 10% of the price of the item. Part X can be transferred at full cost or variable cost. Assume that Part X is priced at full cost. The net tax effect is:
A) an increase in tax by $6 per unit
B) a decrease in tax by $15 per unit
C) a decrease in tax by $3 per unit
D) an increase in tax by $9 per unit

The Variable Cost of Part X Is $50 and the Full